BERLIN -- Volkswagen AG admitted Tuesday that 11 million of its diesel vehicles worldwide contain software that evades emissions controls, not just the half a million cars that the U.S. Environmental Protection Agency said violate the Clean Air Act.
The automaker also issued a profit warning, set aside about $7.3 billion to cover fallout from recalls and lawsuits, and lost billions more in market value.
Volkswagen did not provide information on where the affected cars are, but the overwhelming majority are probably in Europe, where the company dominates the market and accounts for more than 1 of every 4 cars sold.
Martin Winterkorn, VW's chief executive officer, apologized for the deception under his leadership and pledged a fast and thorough investigation. He gave no indication that he might resign.
"Millions of people across the world trust our brands, our cars and our technologies," Winterkorn said Tuesday in a video message. "I am endlessly sorry that we have disappointed this trust. I apologize in every way to our customers, to authorities and the whole public for the wrongdoing."
"We are asking, I am asking, for your trust on our way forward," he said. "We will clear this up."
VW has yet to explain who installed the software, under what direction, and why.
"I do not have the answers to all the questions at this point myself, but we are in the process of clearing up the background relentlessly," Winterkorn said.
Volkswagen's share price slid a further 16.8 percent Tuesday to close at $123.79, after Monday's 17 percent decline.
The EPA said Friday that VW rigged nearly half a million cars to pass U.S. smog tests, exposing the carmaker to potential fines of $37,500 per vehicle, and anyone found personally responsible to $3,750 per violation.
After blaming unrelated issues for more than a year, the company finally told U.S. regulators that it installed software that switches engines to a cleaner mode during official emissions testing. The software then switches off on the road, enabling cars to drive more powerfully while emitting as much as 40 times the legal pollution limit.
"Let's be clear about this. Our company was dishonest. With the EPA, and the California Air Resources Board, and with all of you. And in my German words, we have totally screwed up," the head of Volkswagen's U.S. division, Michael Horn, said Monday while unveiling a new Passat model in New York.
"We must fix those cars to prevent this from ever happening again, and we have to make things right, with the government, the public, our customers, our employees and, very importantly, with our dealers."
The shockwaves were felt in stocks across the sector. Germany's Daimler AG, the maker of Mercedes-Benz cars, was down 7 percent Tuesday, while BMW AG fell 6 percent. France's Renault SA was 7.1 percent lower.
In a statement Tuesday, Volkswagen admitted that "discrepancies" related to vehicles with Type EA 189 engines actually involve about 11 million vehicles worldwide -- more than the 10 million or so cars it sold last year.
"Manipulation at Volkswagen must never happen again," Winterkorn said in his video message.
Volkswagen has more than 600,000 employees "building the best vehicles for our customers," he added. "It would be wrong to place the hard and honest work of 600,000 people under general suspicion because of the grave mistakes of a few."
The company said the $7.3 billion it is setting aside this quarter -- the equivalent of half a year's profits -- will cover necessary service measures and "other efforts to win back the trust" of customers. It didn't mention possible fines or penalties. The violations described by the EPA could total about $18 billion.
"Brands are all about trust, and it takes years and years to develop. But in the space of 24 hours, Volkswagen has gone from one people could trust to one people don't know what to think of," said Nigel Currie, an independent U.K.-based sponsorship and branding consultant.
Christian Stadler, professor of strategic management at the Warwick Business School, said companies rarely pay maximum fines under U.S. regulations.
"I don't think this is a life-threatening event, but it's clear it's going to be very expensive," he said.
VW conceded that the costs it is booking in the third quarter are "subject to revaluation" in light of its investigations and that 2015 earnings targets will be adjusted. It didn't specify by how much.
The company hasn't revealed the results of internal investigations, although it has said that the software in question was installed in other vehicles with diesel engines, and asserted that in most cases, it "does not have any effect."
It also said new vehicles with EU 6 diesel engines currently on sale in the European Union comply with legal requirements and environmental standards.
"I hope that the facts will be put on the table as quickly as possible," German Chancellor Angela Merkel said in Berlin.
CEO since 2007, Winterkorn was hoping to have his stewardship of the company extended at a board meeting Friday. Earlier this month, Volkswagen said it planned to give Winterkorn a two-year contract extension that would keep him in charge through the end of 2018.
Lawmakers in Tennessee plan hearings over whether Volkswagen's admissions could imperil the nearly $900 million in state and local incentives that have been directed toward the German automaker's lone U.S. plant in Chattanooga.
Republican state Sen. Bo Watson of Chattanooga has been a vocal critic of Volkswagen's labor policies. On Tuesday, he cited the state's "significant investment" in the plant in calling for the Senate Finance Committee to investigate the automaker.
Volkswagen received a more than $577 million incentive to build the plant in Chattanooga in 2008. Another state and local package worth up to $300 million was offered last year to persuade VW to expand the plant to build a new SUV there.
Leaders in other countries said Tuesday that they were looking into VW's actions.
German Transport Minister Alexander Dobrindt said he was setting up a commission of inquiry to determine whether the VW diesel vehicles were built and examined in compliance with German and European rules.
"Considering the difficulty of the situation, there has to be full transparency and an effort to clarify the whole matter," Merkel said at a news conference Tuesday.
Cars are the backbone of Germany's export prowess, with autos produced by companies such as Volkswagen, Daimler AG and Bayerische Motoren Werke AG accounting for almost 18 percent of exports last year. Volkswagen, which means "people's car," has been one of the icons of German industrial might since World War II.
The French government on Tuesday said it was beginning an in-depth investigation, to include demanding that domestic automakers "ensure that no such actions are taking place in France."
In Brussels, European Commission spokesman Lucia Caudet said that "we need to get to the bottom of this" and that the EU's executive body is in close contact with Volkswagen and U.S. authorities "to establish the facts."
South Korea also said it would investigate emission levels of Volkswagen diesel vehicles.
In California, which has the nation's toughest emissions standards, angry consumers used social media to complain about the company. Many said they were angry enough at the company to turn away from the brand permanently.
Bob Merlis, an independent music industry publicist, said he had been looking to add a second Volkswagen diesel last week.
"I went shopping for a new one, the Golf Sportwagen, but that's so off the table now," Merlis said. "I don't want to do business with those criminals."
Merlis, who loved the car because it performed well, got good mileage and was "clean," said he felt particularly bad because he persuaded three friends to buy VW diesels after buying his own.
"I thought this was the greatest car," he said. "Now I feel completely used, because I proselytized for it."
Information for this article was contributed by Geir Moulson, Pan Pylas and Erik Schelzig of The Associated Press; by Charles Fleming and Samantha Masunaga of the Los Angeles Times; by Patrick Donahue, Birgit Jennen and Rainer Buergin of Bloomberg News; and by Jack Ewing of The New York Times.
A Section on 09/23/2015